UK Income Tax Rates 2024/25
Income tax in the UK is calculated on a progressive basis — you only pay the higher rate on the portion of income within each band. The personal allowance (£12,570) is the amount you can earn before paying any income tax.
England, Wales, and Northern Ireland share the same income tax rates. Scotland sets its own rates with six bands ranging from 19% (starter rate) to 48% (top rate), making the system more progressive for Scottish taxpayers.
The £100,000 Personal Allowance Trap
One of the most misunderstood parts of UK tax. For every £2 you earn above £100,000, your personal allowance is reduced by £1. By £125,140, it has gone entirely. This creates an effective marginal tax rate of 60% in the £100,000–£125,140 range (40% tax + an extra 20% from losing the allowance).
The most common way to mitigate this is to make pension contributions that bring your adjusted net income below £100,000, restoring the full personal allowance. A financial adviser can help you optimise this.
National Insurance Contributions
Employee National Insurance (Class 1) is effectively a second income tax. For 2024/25, you pay 8% on earnings between £12,570 and £50,270, then 2% on everything above £50,270. Unlike income tax, NI does not have a personal allowance taper — and employer NI (at 13.8%) is an additional cost borne by your employer on top of your salary.
How Pension Contributions Reduce Your Tax
Pension contributions via salary sacrifice reduce your taxable income, saving both income tax and National Insurance. Personal pension contributions receive basic rate tax relief automatically (the pension provider claims 20% from HMRC). Higher and additional rate taxpayers can claim the extra relief through their self-assessment tax return.